Senators to SEC: It's time to open private placements to public

Urge Commission to speed up regulation that will ease regs on Reg D offerings

Nov 30, 2012 @ 3:50 pm

By Mark Schoeff Jr.

private placements
+ Zoom

Republican senators urged the Securities and Exchange Commission to complete by the end of the year a regulation that would lift the ban on advertising private-placement investments to the public.

In a letter to SEC Chairman Mary Schapiro, the lawmakers said that the agency should move forward with a proposed rule that implements a section of the JOBS Act that allows firms to make private stock offering to any accredited investor nationwide.

Congress passed the bill earlier this year by wide bipartisan margins. Proponents assert it will spur the economy by easing registration requirements and other rules for start-up companies. They want the SEC to speed up its rulemaking.

Critics of the measure, such as the North American Securities Administrators Association, argue that the reforms will leave investors vulnerable to fraud and want the SEC to proceed at a measured pace.

One area of concern is whether the rule goes far enough – or too far – in verifying that investors who purchase private placements are accredited, or have a net worth of more than $1 million not counting their homes.

The senators said that the test contained in the proposed rule is sufficient.

“A more intrusive and prescriptive test would be unnecessarily burdensome in many cases and insufficiently protective in many others, and it also would effectively overturn Congress' intent in enacting Section 201 of the JOBS Act,” Sens. John Thure, R-S.D., and Pat Toomey, R-Pa., and nine other GOP senators wrote in a letter to SEC Chairman Mary Schapiro. “The statutory purpose would be undermined by new, complex and prescriptive requirements that would unduly inhibit the use of [Rule] 506 and [Rule] 144A for capital raising by small- and medium-sized businesses that remain the engine of job growth in the United States.”

A spokesperson for the SEC declined to comment on the letter.

The newly formed SEC Investor Advisory Committee, in its first official recommendation last month, urged the agency to include more investor safeguards in the general solicitation reform rule. It is unclear whether the guidance will influence the SEC commissioners as they finalize the rule.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

How advisers can better communicate the risks and rewards of investing in emerging markets

Senior columnist John Waggoner discusses how financial advisers can help clients better understand the advantages of having exposure to emerging markets and the increased volatility that often comes along with investing in them.

Video Spotlight

A Teacher’s Lesson Plan

Sponsored by Prudential

Latest news & opinion

Fiduciary advocates press CFP Board for specifics on standards changes

Meanwhile, few brokerages and their trade associations, which blasted the DOL's fiduciary rule in comment letters, are responding to the CFP Board's proposal.

Big gains attract new money to emerging markets, but should investors stay?

An estimated $6.7 billion has flowed into emerging-market stock funds and ETFs so far this year, according to Morningstar.

Attorney blasts Finra after regulator loses insider trading case

Lawyer says it was 'slimy' of Finra to publicize the case while it was still being litigated.

Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media.

Fidelity wins arb case against wine mogul but earns a rebuke from Finra

In the case of investor Peter Deutsch, Fidelity doesn't have to pay any compensation, but regulator said firm put its interests ahead of his.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print